BacktestFolio · Glossary
Benchmark
In plain language
It is the 'rival' against which you compare your portfolio — usually a market index such as the S&P 500 or a 60/40 portfolio. If your portfolio beats the benchmark with less risk, you are adding value over passive management.
Technical definition
Reference index or model portfolio used to evaluate the relative performance of a strategy. Metrics such as Alpha, Beta, Tracking Error and Information Ratio are all calculated against the benchmark.